The G20 finance ministers and central bank governors recent meeting in Rio de Janeiro discussed, among other things, a particularly contentious issue: a global tax on the super-rich. This was inspired by a plan from the EU Tax Observatory which could raise an estimated US$250 billion by changing tax arrangements for roughly 3,000 individuals.
The plan was backed by Brazil, this year’s G20 host, as well as France, Spain, the African Union and other nations, but opposed by the US and Germany.
According to the Observatory’s Global Tax Evasion Report 2024, “global billionaires have effective tax rates equivalent to 0% to 0.5% of their wealth, due to the frequent use of shell companies to avoid income taxation”. Oxfam EU figures quoted in support of the plan says that the super-rich have managed to accumulate some $42 trillion over the past decade.
For the super-rich, the question must come down to whether paying more tax is worth the benefit in terms of more stable, less volatile and aggressive societies, less populism, and a climate of opinion that might be more ready to let them keep their wealth.
Yet opposition lies at the political as well as the individual level. Janet Yellen, the US treasury secretary, offered little encouragement for the plan prior to the G20 meeting. A ministerial declaration issued after the meeting was more of a compromise and statement of intent than the actual plan advocated by many member nations.
“Wealth and income inequalities are undermining economic growth and social cohesion and aggravating social vulnerabilities,” the statement says. “With full respect to tax sovereignty, we will seek to engage cooperatively to ensure that ultra-high-net-worth individuals are effectively taxed.”
US resistance to the wealth tax principle may be less economic than ideological: to protect one of its most revered totems - the self-made (rich) man. A famous 1933 US cartoon shows Franklin Delano Roosevelt throwing out all the dead policies that caused, and did not cure, the Great Depression. One prominent one is the stuffed scarecrow labelled “Rugged Individualism”. Unfortunately, that scarecrow still has plenty of straw.
Ironically, China is offering a very different model for any country that wants to become an economic superpower. One might say it’s the absolute antithesis of US values. And yet it worked. Perhaps that merits a review and even revision of those values. If more collectivism and social context didn’t hold China back, would it really hamper the US?